Recently, we have seen an increase in requests from clients to put life interests in their Wills. A life interest can bring many advantages, especially for those with blended families who want to ensure that all members are well-provided for. In this South East Lawyers blog, lawyer Brigette Dempsey explains what a life interest means, how it can be used in Wills and Estates planning, and why it is essential to chat with a lawyer about whether this is the best option. Read on.
What is a life interest?
A life interest gives someone the right to live in your house rent-free for the rest of their life – without giving them your home.
In this scenario, the house remains part of your Estate instead of being transferred to the life tenant. A life interest can also be conditional and doesn’t have to last for the rest of the tenant’s life. The interest can end earlier, such as when your beneficiary moves out or sells the house. A life interest can also contain conditions that end if the home is not maintained correctly or is no longer the life tenant’s principal residence.
What happens to the house when the interest ends?
Once the life interest period ends, your house will still follow the instructions of your Will, as opposed to the Will of the life tenant, providing you with a level of control you would not have otherwise held if you had just given your house to your beneficiary. Once you have given something to someone, you cannot control what they do with it, so it is essential to consider whether you are comfortable with this or whether you would prefer to consider including a life interest in your Will.
Although a life interest can be a beneficial condition to include, there may need to be precise instructions made, depending on the structure and needs of your family. A common concern for those with blended families is how to provide for their spouse while also providing for their children – particularly in situations where the family home is the primary asset of their Estate. Some may wish to provide for their spouse for the rest of their life, but they may also want to ensure their children ultimately benefit from their Estate, where a ‘portable life interest’ can be introduced to cover your bases.
What is a ‘portable life interest’?
Portable life interests are particularly popular with blended families because they allow a willmaker to provide for their spouse for the rest of their life while preserving part of the Estate for their children.
A portable life interest allows your Executor to purchase a substitute property for your beneficiary to live in if your house is no longer suitable for them. For example, as your spouse ages, they may no longer be able to continue to live in the family home. They may need to downsize or move into aged care or a granny flat. A portable life interest does not end even when your beneficiary moves to a new principal place of residence, and the increased flexibility of a portable life interest can allow you to better care for your loved one for the rest of their life.
As a non-portable life interest might not sufficiently provide for the needs of a surviving spouse, portable life interests are becoming increasingly popular. When considering either of these options, the most important thing is to chat with a Wills and Estates lawyer, as they can help you understand the advantages and disadvantages and how you can customise the interest to suit your needs and circumstances.
If you are considering leaving a life interest to someone in your Will, our knowledgeable and experienced Wills and Estates team at South East Lawyers can help you fully understand what this process involves and adequately tailor the life interest to your wishes. Reach out to our team here for a chat.